SECTION 1: APPLICANT INFORMATION
Applicant Name: Ariana Fariab
Project Name: Clipper
Project Description: Clipper is a DEX designed for blue-chip token swaps (e.g., ETH, WBTC, ARB, USD stablecoins) with no impermanent loss for LPs. Clipper’s novel architecture makes money for LPs using the same arbitrage strategy used by professional market makers, but implemented in a permissionless and non-custodial manner. Clipper incorporates prices formed off-chain into a sophisticated formula and validates them on-chain, removing the need for arbitrageurs and ensuring lower gas fees for traders.
Team Members and Roles:
Clipper is governed by AdmiralDAO, which has hired labs companies to provide certain administrative services. These include, among others, Shipyard Software, the original developer of the Clipper platform.
Shipyard Software Team Bios
1 Co-founder (Business)
1 Co-founder (Smart Contract Dev)
2 Sr. Frontend Dev
3 Sr. Backend Dev
1 Smart Contract Dev
1 Head of Ops
1 Head of Content & Research
Project Links:
Website
Docs
Dune Dashboard
Twitter
Discord
Contact Information
Point of Contact: Ariana Fariab
Point of Contact’s TG handle: @arianafariab
Twitter: @arianafariab
Email: ariana@shipyardsoftware.org
Do you acknowledge that your team will be subject to a KYC requirement?: Yes
SECTION 2a: Team and Product Information
Team experience: Please refer to Shipyard team bios for founder information: About
Co-founders
Mark Lurie (Co-founder & CEO): 2 VC-backed marketplace exits, investor at Bessemer, FJ Labs, HBS, Harvard AB (Economics) ‘07. https://www.linkedin.com/in/mlurie
Abe Othman, PhD (Co-founder): AngelList Head of Quant Fund, 2 VC-backed exits, Dissertation on Automated Market Making, CMU CS PhD, Harvard AB (Applied Math) ‘07.
What novelty or innovation does your product bring to Arbitrum?
On most DEXs, impermanent loss is rampant and traders are constantly susceptible to being front-run or sandwich attacked by MEV bots. Clipper’s novel formula market maker uses a sophisticated pricing function that factors in both token ratios and up-to-the-second external market prices from centralized and decentralized oracles. This design results in zero arbitrage opportunities for bots to exploit (and no need for them) and eliminates impermanent loss altogether. As a result, Clipper brings better yields to Arbitrum LPs and lower prices to Arbitrum traders.
Is your project composable with other projects on Arbitrum? If so, please explain: Yes, Clipper is already composed into 1inch and similar aggregators and solvers. Any protocol that needs to compose with swaps can compose with Clipper.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
Other DEXs, such as Uniswap and Sushi, are comparable insofar as they also offer swaps. However, Clipper has a radically different architecture and its lack of impermanent loss and toxic bot activity sets it apart. Namely, it’s profitable for both LPs and the protocol, whereas CPMM DEXs are not.
How do you measure and think about retention internally? (metrics, target KPIs)
When we think about retention, we primarily think about liquidity providers, not traders. The reason for this is that Clipper’s novel architecture (more on this later in the proposal) is structured so that the more TVL there is in Clipper’s liquidity pools (there is one multi-asset pool on each chain), the larger the trade sizes for which Clipper provides better prices than the CPMM’s x*y=k pricing formula. Traders come in almost entirely from DEX aggregators, which route trades based purely on price competitiveness. In other words, traders tend to use Clipper via aggregators and aggregators only care about prices. This works to Clipper’s advantage due to its architectural edge in pricing, but only if there is adequate liquidity. This means retaining LPs is vital to attracting and retaining traders.
We measure retention by focusing primarily on “TVL per LP” and secondarily on “Duration of TVL.” Growth in those metrics implies LPs are happy and allocating more of their capital to Clipper. Volume will follow naturally from DEX aggregators.
Relevant usage metrics
Daily Active Users: https://dune.com/queries/3482220/5852863
Daily User Growth: https://dune.com/queries/3482205/5852843
Daily Transaction Count: https://dune.com/queries/2629502/4366295
Note: to find the transaction count for a specific day, take that day’s value and subtract the previous day’s value from it.
Daily Protocol Fee: This is not applicable to Clipper. LPs make money through Clipper’s trading formula which results in pool appreciation, not through fees.
Daily Transaction Fee: This is not applicable to Clipper because LPs do not take explicit transaction fees.
Daily ARB Expenditure and User Claims: None. Clipper has not received any incentives to distribute. All usage to date is organic.
Incentivized User List & Gini: Not applicable–we have not and currently don’t incentivize anything on Arbitrum.
TVL: Across all chains: $9.94M, On Arbitrum: $1.11M → see in real-time here.
Trading Volume: On Arbitrum: $26.48M (current)
Price Impact: Price impact is a function of trade size so it will vary based on that. The average minimum on Arbitrum is ~0.05%.
List of Traders: https://dune.com/queries/3482174/5852793
List of Liquidity Providers: N/A - there has been no incentivized period for Arbitrum yet.
Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan: Yes
Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest: No
SECTION 2b: PROTOCOL DETAILS
Is the protocol native to Arbitrum?: Yes
On what other networks is the protocol deployed?: Ethereum, Optimism, Polygon, Mantle
What date did you deploy on Arbitrum mainnet?: The first version was deployed on October 18, 2022. Transaction ID.
Do you have a native token?: Yes - SAIL Supply & Circulation | Clipper
Past Incentivization: We have not yet run any incentives on Arbitrum.
Current Incentivization: How are you currently incentivizing your protocol?
Clipper generates sustainable yields and prices organically. We do not have any incentives running on Arbitrum, which is why we’re applying for this grant–to fuel growth.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program? The DAO received ARB in the initial ARB airdrop to DAOs who had been developing on Arbitrum, at the lowest tier.
Protocol Performance: Real-time and historical performance metrics can be viewed on Dune and Clipper’s Data Dashboard.
Arbitrum Quick Stats:
1 month APY (current): 76.7%
TVL (current): $1.11M
Total transactions on Arbitrum (past 4 months): 120,969
Note that with current TVL, clipper does small dollar value transactions, so its number of transactions is higher than its dollar volume relative to other DEXs.
Protocol Roadmap: The DAO maintains a public roadmap. On the advice of counsel, we cannot make public statements that would create expectations about any individual’s future efforts besides what has been formally approved by the DAO.
Audit History & Security Vendors: Audits | Clipper
Security Incidents: None
SECTION 3: GRANT INFORMATION
Requested Grant Size: 249,004 ARB
Justification for the size of the grant:
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Liquidity Farming: 123,846 ARB
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Clipper has one multi-asset liquidity pool on Arbitrum. The liquidity farming program will take place solely in that pool. ARB received from this grant will not be allocated to any other liquidity pools on Clipper. The objective of this program is to attract new LPs and additional TVL to Clipper’s Arbitrum pool.
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To provide context for our calculation, Clipper has a unique market maker architecture called a Formula Market Maker (FMM). The FMM does not use the x*y=k formula. Rather, it uses a more complex pricing formula that provides better prices (lower slippage) on trades than CPMM-based DEXs, given an equivalent amount of liquidity. This formula enables the pool to have a target trade size, which requires a target TVL. Note that the target TVL will differ from the current actual TVL (this is a function of the formula).
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To calculate the amount of ARB needed to attract new LPs and TVL to Clipper’s Arbitrum pool, we must first determine the target trade size the pool should serve. Currently, 1inch data shows that 94% of swaps on Arbitrum are under $10k and 77% of swaps are under $1k. This implies we should target ~$5k trade sizes in order to deliver best prices on ~90% of Arbitrum’s trades. For the pricing formula to provide better slippage than CPMM DEXs on $5k trades in the Arbitrum pool, Clipper mathematically needs to have $3.5M liquidity in this pool (this is the target TVL). The analysis for this is complex but requires comparing Clipper’s invariant (available here) against x*y=k . These TVL and trade size targets are good starting points since they target the majority of current user demand. As the pool’s TVL grows from the incentive program, it will be able to provide best prices on increasingly larger trade sizes and target a wider range of traders. Based on data collected from our past farming programs, we can assume that APYs of 30% (this is on top of LP profits the pool naturally generates) are required to create adequate incentive for new LPs. Lastly, this program will run for 12 weeks. Considering all of our inputs, we arrive at the following calculation: $3.5M (TVL) * 0.30 (APY) * 0.23 (fraction of year) = $241,500 / $1.95 (current ARB price) = 123,846 ARB (rounded).
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User & TVL Migration: 125,158 ARB
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This program will reward existing Clipper LPs who have provided liquidity to Clipper’s Ethereum, Optimism, Polygon, or Mantle pools and migrate any portion of their liquidity on any of these chains to Clipper’s Arbitrum pool. This program will give existing LPs an additional incentive to migrate to Arbitrum on top of the liquidity farming program that will be running in the Arbitrum pool concurrently. Clipper has more than 99k LPs and over $10.53M TVL across all chains, but only 1.84% (1,833) of LPs and 11.1% ($1.11M) of TVL is on Arbitrum. This presents a large customer acquisition opportunity for Arbitrum within the Clipper community, which is why it makes sense to aggressively target migration by offering an additional incentive for it. The objective of this program is to incentivize user and TVL migration from Clipper’s other chains to Arbitrum.
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There are 97,623 Clipper LPs on chains other than Arbitrum. Based on data collected from similar programs we have run and considering average bridging costs (for various $ amounts), we can assume it requires a minimum of $50 to motivate an LP to migrate to Arbitrum. This accounts for the fact that the majority of Clipper’s TVL currently resides on Ethereum and costs of Bridging from Ethereum are especially high. Given the grant program’s 12-week timeline, we assume a 5% conversion rate is realistic (based on data from past programs). Given these inputs, we arrive at: 97,623 * 0.05 * $50 = $244,057.50 / $1.95 (current ARB price) = 125,158 ARB (rounded).
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Grant Matching: None
Grant Breakdown: See above
Funding Address: 0x4122E5aA4A998526D146235d6DDc067eCd0E11FF
Funding Address Characteristics: Multisig with 3/7 signers.
Treasury Address: Same as funding address.
Contract Address: Contracts supporting the incentive programs will be deployed upon receipt of the grant.
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Objectives:
The objective of both programs is to grow the LP population and TVL on Clipper’s Arbitrum deployment. The liquidity farming program specifically targets new LPs and new (or additional from LPs already in Clipper’s Arbitrum pool) TVL. The user and TVL migration program specifically targets existing Clipper LPs on chains other than Arbitrum, incentivizing migration to Arbitrum from within Clipper’s existing user base.
Execution Strategy:
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Liquidity Farming: Clipper’s current Arbitrum liquidity pool will become a farming pool. This will be executed the same way we deployed our OP farming pool. Immediately upon receiving the grant, a smart contract for the ARB farming pool will be deployed and the program will begin.
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User & TVL Migration: Every wallet that is both a Clipper LP on Arbitrum and a Clipper LP on another chain will receive an airdrop flat amount (on top of the liquidity farming incentives) to cover bridging costs and incentivize migration of users from other chains. The amount allocated to this will be prorated equally across 12 weeks, so that those who migrate earlier will get a greater amount than those who migrate later (we expect the blended average to be ~$50). Clipper has already airdropped tokens (its own SAIL token) on Arbitrum in the past, so the airdrop will be executed using the same contracts and interface.
What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity, or some other targeted metric?
Clipper’s Arbitrum pool already has some of the best organic yields on Arbitrum and that’s before providing incentives. For example, Clipper produced an 84% APY for the month of February alone. The objective of these incentive programs is to provide a draw that brings in new users to experience Clipper’s yields first-hand–we believe people need to experience it to believe it. Once users experience Clipper’s already existing superior yields and zero impermanent loss, they will stay long-term. The platform itself is sticky, it’s just a matter of getting users “in the door”.
Additionally, for the liquidity farming program, the pool will require an 8-week “charge up” period during which any early withdrawals forfeit a logarithmic amount of the promised incentives (and each withdrawal restarts the clock). This is how we have implemented “farming pools” in the past and it has worked quite well. This should also help with stickiness for the migration program since migrants will want to take advantage of the farming program benefits as well. There is also already baked-in loyalty with the migrant group, as they are existing Clipper users who are choosing to remain on Clipper.
Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy.
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For Liquidity Farming, the primary KPI will be TVL and the secondary KPI will be the number of LPs. We track this with the Dune dashboard as well as on Clipper’s data dashboard. These dashboards can be used as sources of truth.
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For User & TVL Migration, the KPI will be the ratio of the number of LPs on Arbitrum to the number of LPs on all other chains. We will be adding such a query to this Dune dashboard shortly.
Grant Timeline and Milestones:
Liquidity Farming
Total Duration: 12 weeks
Timeline: We will need a couple of weeks (maximum) to deploy and fund the farming pool contract on Arbitrum (this technology is already battle-tested since we’ve used it for past incentive programs on other chains). After this, the program will begin and incentives will be distributed gradually over the course of 12 weeks.
User & TVL Migration
Total Duration: 12 weeks
Timeline: This program will begin on the same day the liquidity farming program begins, so as to create the dual-reward incentive. Rewards will be distributed to LPs upon migration to Arbitrum, for the duration of the 12-week program. The key milestone for this program will be achieving the target 5% conversion rate. A mid-point milestone will be achieving a 2.5% conversion rate.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?
Clipper has long wanted to introduce incentive programs on Arbitrum but doesn’t have sufficient funds of its own and has never received an incentive grant to do so. The grant will enable Clipper to:
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Attract adequate liquidity to provide better prices on the trading pairs that matter most for everyone in the Arbitrum ecosystem. We know this will work because on mainnet we produced this study that showed Clipper beats 0x API on a $10k USD<>ETH trade 90% of the time. That was with $5M+ TVL in the mainnet pool. Currently, Clipper’s Arbitrum deployment only has $1.11M TVL. More efficient prices mean more Arbitrum economic activity can happen with the same resources.
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Attract new users to the Arbitrum ecosystem. Clipper previously used a grant from Optimism to attract new users which resulted in over 100k additional Optimism users on Clipper (in the twelve months following the March 2022 grant).
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? Yes
SECTION 5: Data and Reporting
Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?
Yes, we’re prepared to comply. No special requests.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?
Yes, AdmiralDAO Operators (the DAO that governs Clipper) will post bi-weekly updates on the forum on behalf of Clipper.
Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream? Yes
